Happy New Year, for 2006!

For all our Clients, associates, prospective Clients and business friends, our wish is a very prosperous New Year for you and yours.

We will certainly do all we can to make it your best on record!

Lot’s to do in 2006

No one we know is expecting 2006 to be any easier than the last few years, but everyone is anticipating success. Now that’s good thinking!

With so much to do to build this success, remember you don’t have to do it all yourself. If you can’t delegate it, at least get help with it - and remember we are here to help. See how.

One thing to do in 2006 to make sure it’s the best on record, is to get your pricing right. If you think your pricing is “pretty right” anyway, go on to read the case study for this month. You can always pitch your pricing more finely!

Case Study for the first Management Memos of 2006

From time to time, we publish case studies to help clients and others take a different view of some specific management issue. For January 2006, the case study is on pricing.

All our case studies are based on real issues faced by real clients. Of course you can’t identify the client, our confidentiality record is too good for that! Remember though, that this case, like all the others, is real.

Read the case study below, then click through (on the link) to read the response.

[If you are not used to reading case studies, remember this. Real life business unfolds like a story. So the case study is written as a story. At the end, all you have is a story. Finding what issues are in play, and how to get the best outcome, is the art of management. Read the story below, see the response, then see what you think afterwards.]

“Kanmantoo Kovers” - A Case Study in Pricing

Stan Trethowick has operated “Kanmantoo Kovers” for almost thirty years. He is a specialist window covering retailer, and he sells blinds and drapes of all kinds.

Long ago, Stan realised that there are some terrific fabrics for drapes, and they make a most spectacular display, provided that you know what you are doing, and help the customer make the right selection for their particular home.  Doing this is not a cheap exercise, and to make a “reasonable profit” on these more expensive fabrics, you have to charge a “reasonable price”.

For the early years, Stan did quite well, and he attributed this to his willingness to “go the extra mile”, and especially to help customers choose fabrics they could afford.  He would rather spend a little extra time with a prospect to know they had made a right decision, than to have someone choose a fabric they couldn’t afford, and cancel the order.  In his region, he became well established as the leading supplier of window coverings, and his reputation for quality and fair trading was unsurpassed.  His profit was good enough to keep him happy, and he enjoyed most of the good things money can buy.

Stan always felt a sense of pride when he visited a home he had helped decorate with window coverings, and apart from the odd, inevitable grumpy customer, word of mouth about “Kanmantoo Kovers” was very good indeed.

Other curtain shops opened in town, and two of them managed to survive, leading to a slight, but perceptible change in customer behaviour in Stan’s shop.  The comment “Gee, that sounds a bit dear!” began to be heard much more often than in the past.  Customers seemed less willing to commit to placing an order, and making a sale became much harder than just helping them choose a fabric they liked and could afford.  Much harder indeed!

A major discount curtain retailer opened in his town.  Stan did not see this as a problem though, because he was confident of the quality of what he sells, and he knew that what he sells gives real value for money to his customers.  Confident that sensible buyers will choose quality over discount, Stan kept on doing what had worked for him for years and years.

Like many small business people, Stan had felt the increasing pressure of business, and he was finding it harder to make the profits he had been accustomed to in the past.  The once sparking, proud showroom was packed with all kinds of fabric swatches to help capture every prospect who walked in the door; he would install at any hour to make sure no-one said “No” because of inconvenient fitting times; his display lights were missing bulbs and so were turned off because there isn’t time to do everything; and the shop began to look like it needs a repaint.

What really began to niggle Stan, was that the people who had always bought the “top shelf” items from him, began to appear less frequently, and he was hearing of jobs he had missed out on, without even getting chance to quote.  In years gone by, this was unheard of!  Stan did some checks on people who were still coming to his store.  He was shocked to hear that his former “top shelf” customers were saying, “Not really sure, the quality doesn’t seem quite what I’m looking for”.   Sometimes he got the order, but it was no longer a sure thing like it had been.

It had really hurt him to hear that some of his clients had thought that the "quality was not quite what they were looking for".  His clients' needs had always come first, and he had always made sure that he provided the very best that money could buy - in every price segment.

Like so many others,  Stan had found his sales representative a good source of information, and had taken on board all the recommendations the sales reps had provided.  Not that he followed them blindly - sometimes he modified their price and ranging recommendations.  But one thing he did know, was that sales reps are a good way to keep abreast of the market.  Their advice on pricing was usually worthwhile, because it showed what the market could bear.  As a result, his prices were much the same as other people's (as far as he could tell), but his margin was being squeezed and expenses always seem to keep rising.  He always tried to be competitive, despite rising costs of buy-ins, and while he had no problem applying his usual mark-up, it was a real struggle getting the margin he was targeting.  The squeeze on margins, coupled with the remorseless rise in expenses, was taking its toll on both Stan and the business.

While Stan was niggled by his loss of standing with “top shelfers”, he really went ballistic one day when a sales rep. told him he was about to be overtaken in volume in the economy lines by the discount store that had ben trading there now for five years.  His budget customers were still saying “Gee, that sounds a bit dear!”, but price checks showed that he was significantly cheaper than the brand name discounter.

Now Stan was in a bind.  In the middle of losing his original, traditional “top shelfers” because “the quality doesn’t seem quite what I’m looking for”, he was also losing economy shoppers because his prices seemed too dear - despite being the cheapest in town.  Profit was down, and now for the first time in some years, he was operating with an overdraft.

What is wrong with Stan’s business, how did he get it so wrong, and what can he do to get back on track?

Click Here to see the response of The Red Zebra